Ex-AlcaLu Boss Tasked With Bolstering Altice

Expansionist cable group Altice has charged new chief operating officer and ex-Alcatel-Lucent boss Michel Combes with making structural improvements that will support its future growth.

Altice confirmed Monday that Combes has become its new chief operating officer, as well as the chairman of its Numericable-SFR business, following press reports last week that he would take up a senior executive role with the company on leaving Alcatel-Lucent (NYSE: ALU). (See Eurobites: AlcaLu's Combes to Run Altice Ops.)

Combes had announced plans to quit his role as CEO of Alcatel-Lucent after Finland's Nokia Corp. (NYSE: NOK) agreed earlier this year to buy the company in a €15.6 billion (US$17.6 billion) deal. (See Nokia Makes €15.6B Bid for Alcatel-Lucent.)

Following earlier speculation, France's Le Figaro newspaper had last week reported that Combes would replace Patrick Drahi, Altice's founder, as chairman of Numericable-SFR while also taking charge of international operations for Altice, which controls cable and telecom businesses in Israel, Portugal, Switzerland and several other markets besides France.

It is hardly surprising that Altice was drawn to Combes: Having developed a reputation for cost-cutting at Alcatel-Lucent, he must have seemed like an ideal candidate to an organization that is eager to fatten its profit margins by slashing expenses.

In a statement released yesterday, Drahi indicated that Combes's main task would be to improve efficiency at Altice.

"I am very pleased that Michel, whom I have known for over 20 years, has decided to join us to help structure the Group's operations and to harmonize our best practices throughout our subsidiaries and countries," he said.

This streamlining is likely to occur while Altice continues on its current acquisition spree: Having recently agreed to pay $9.1 billion for US cable operator Suddenlink Communications , Altice has also been setting up a Dutch holding company and a dual-class share structure to support future takeover activity. (See Altice to Buy Suddenlink in $9.1B Deal, What's It All About, Altice?, Is Altice the Great US Cable Consolidator?, Altice Sees Brighter Days in 4-Player France and Altice Restructures to Support Takeover Moves.)

Those moves followed the company's takeover of French mobile operator SFR, which Altice subsequently merged with its Numericable cable business, and the acquisition of Portugal Telecom SGPS SA (NYSE: PT).

But the company recently failed to engineer a takeover of Bouygues Telecom , France's third-biggest mobile operator, which rejected its offer after deciding it could deliver more value to shareholders as a standalone business. (See Bouygues Chief Bitter Over Iliad's Inclusion, Altice Queries Bouygues' Motives in Rejecting €10B Bid, Bouygues Says 'Non' to Altice and Altice Confirms Bid for Bouygues Telecom.)

A deal would have left France with just three mobile operators and helped to relieve some of the pricing pressure on the country's players, but it was opposed by French politicians worried about the impact it would have on competition.

Reporting second-quarter financial results in July, Altice revealed that its EBITDA had soared by 13%, to around €1.5 billion ($1.7 billion), compared with the same period in 2014, even though revenues fell by 2%, to €3.9 billion ($4.4 billion), over the same timeframe.

Altice claims to have benefited heavily from synergies between Numericable and SFR but indicated on its earnings call with analysts that it expects profit margins to continue improving in the second half of the year.

"[Combes's] deep experience in the international telecom sector will help significantly reinforce our ability to successfully operate all of our affiliates and to continue to grow our footprint in new territories," said Dexter Goei, Altice's CEO, in the company's statement, effectively setting Combes the challenge of improving operational efficiency while Altice continues to build market share.

For all the latest news from the wireless networking and services sector, check out our dedicated mobile content channel here on Light Reading.

Similar to Altice, Alcatel-Lucent flagged improvements in profitability despite signs of weakness on the sales front when reporting its own second-quarter results earlier this year. (See AlcaLu Grows Profits Ahead of Nokia Deal.)

The equipment maker's net loss narrowed to just €54 million ($61 million) in the quarter, from €298 million ($336 million) in the year-earlier period.

Although sales grew at a year-on-year rate of 5%, to €3.45 billion ($3.89 billion), they were down by 9% on a constant currency basis due largely to a reduction in spending by operators in the US, which remains one of the equipment maker's biggest geographical markets.

Nevertheless, Combes is credited with delivering something of a turnaround at Alcatel-Lucent, which struggled for years following the 2006 merger that brought it into existence.

Under his "shift plan," Alcatel-Lucent has not only been cutting costs, and avoiding bankruptcy as a result, but also focusing on the development of IP networking products, as he explained in an exclusive video interview conducted with Light Reading in November 2014.

{videoembed|712350}

The division responsible for IP networking has since emerged as the star of the Alcatel-Lucent show, reporting a 22% year-on-year increase in second-quarter revenues, to about €1.7 billion ($1.9 billion), and sales growth of 10% on a constant currency basis.

Its success largely explained Nokia's interest in acquiring Alcatel-Lucent and the Finnish player believes this IP networking expertise will make it a "more complete player" than Sweden's Ericsson AB (Nasdaq: ERIC), one of its chief rivals. (See AlcaLu Deal Makes Us 'More Complete' Than Ericsson, Says Nokia CTO.)

Although his most recent management experience is with an equipment maker, Combes is no stranger to the service provider world, having joined Alcatel-Lucent in 2013 from UK-based Vodafone Group plc (NYSE: VOD), where he was head of European operations.

Combes has also previously worked at French telecom incumbent Orange (NYSE: FTE).

His departure from Alcatel-Lucent, however, has been mired in controversy, with French politicians reportedly complaining about the payout he is set to receive.

According to Le Journal du Dimanche, Combes could earn about €13.7 million ($15.5 million) in stock over the next few years.

Government figures are reported to have expressed disappointment that executives are receiving huge rewards when conditions remain tough for most other individuals.

— Iain Morris, , News Editor, Light Reading